BJ’s takes a bigger slice of casual-dining market
It’s happy hour at the new BJ’s in Culver City, and Eric Gordon is sitting at the restaurant’s packed bar section, taking big bites of a barbeque chicken pizza and glancing now and then at the Angels game on a massive flat-screen TV overhead.
Two to three times a week, Gordon, 21, finds himself at the casual-dining chain, his new go-to place for eating out. He likes the “chill” atmosphere and the 18-page menu of pizza, burgers, pastas, desserts and signature handcrafted beers. And in this economy, he especially likes the price.
Like most casual restaurants, BJ’s Restaurants Inc. saw customer traffic decline during the recession, especially early in the week and during lunchtime and happy hour. But its vast menu and modest prices — the average check total is $12.50 per person — have helped it emerge from the shadow of larger rivals such as the Cheesecake Factory and Chili’s.
“I stopped going to other places just to cut back on expenses, but I’d still come here,” said Gordon, a substitute teacher and actor from Ladera Heights who planned to head to another BJ’s in Cerritos that night to hang out with friends. “I can get out of here for $15 and be good.”
BJ’s is riding high after performing well during a tough few years for the restaurant industry. Sales are up 71% over the last three years and its stock hit $27.53, a record high, on April 23. (The shares fell $1.15, or 4.6%, to $23.85 on Tuesday.) The Huntington Beach company’s soaring revenue landed it on Forbes’ list of the top 10 fastest-growing retailers last month along with giants Amazon.com Inc. and Apple Stores.
Founded in 1978 as a Chicago-style pizzeria in Santa Ana, BJ’s catered to diners who wanted their deep-dish served in an atmosphere that was more family-friendly restaurant and less dingy pizza joint. Picnic tables, linoleum floors and do-it-yourself soda machines were passed over in favor of cushy booths, carpeting and full-service waiters.
Until recently, BJ’s has expanded slowly, growing to 94 locations in 13 states after more than three decades in business. But the company is picking up the pace, with executives eyeing new locations around the country amid hopes of one day growing the chain to more than 300 restaurants.
Its success is giving rivals serious competition in the crowded casual-dining sector, which includes chains such as T.G.I. Friday’s, Applebee’s and P.F. Chang’s.
“It’s even more competitive now than it was in the past,” said Jeff Uttz, executive vice president and chief financial officer at Irvine-based Yard House. “We think BJ’s is a great company. We keep an eye on everything they do.”
Compared with its competitors, BJ’s “is very good at creating a brand image of a non-chain chain,” said Conrad Lyon, senior equity analyst at Global Hunter Securities.
“What’s so different about BJ’s versus a California Pizza Kitchen versus a Chili’s — you go in there thinking you’re going to pay a lot more for the experience than you’re going to get, and you don’t,” Lyon said. With fewer than 100 restaurants, “they’re at the sweet spot where they can grow without stubbing their toe and not get too big for their britches, so to speak.”
Mall operators are banking on BJ’s to help drive customer traffic and consumer dollars to their centers. The chain was Westfield Group’s first choice to move into the newly remodeled 8,500-square-foot space at its Culver City shopping center, said Larry Green, senior vice president of development for Westfield.
“The experience has been very, very positive wherever we’ve had an opportunity to work with them,” Green said of the six BJ’s locations in Westfield malls. “Good restaurants are incredibly important because they help our other retailers who are at the center, and BJ’s is a great example.”
Despite the recession, sales held up relatively well at BJ’s and all of its restaurants remained profitable, Chief Executive Jerry Deitchle said. Each location brings in an average of about $5 million in revenue and 400,000 guests a year. The company didn’t close any restaurants or lay off any workers, and store openings continued, albeit at a slower pace.
Restaurant analysts credit smart business moves with helping the chain weather the downturn.
In addition to adding some less expensive appetizers to the menu, BJ’s introduced a line of lunch specials with entrees starting at $5.95 in August 2008. The value-oriented offerings were such a hit with diners that the chain is keeping them as part of its regular menu.
“BJ’s is a middle-of-the-fairway concept in America,” Deitchle said. “But we execute it with a greater amount of variety and quality than the mass-market, casual-dining concepts historically have done.”
Founded by Bill Cunningham and Mike Phillips, two friends from the Midwest, BJ’s was originally called BJ Grunts in homage to a casual-dining restaurant in Chicago called R.J. Grunts. But the chain became known simply as BJ’s after it received complaints from executives at R.J. Grunts, said Phillips, now 70.
In the mid-1990s, BJ’s was sold to two accountants, Paul Motenko and Jerry Hennessy, who introduced larger-format restaurants, big-screen TVs and expanded menu offerings. Today’s BJ’s menu includes about 100 items.
Its beer selection, a hallmark of the chain, includes seven BJ’s brews that are always served on tap, as well as seasonal and craft beers (cocktails and mainstream beer staples such as Bud Light are available too).
Customer favorites include BJ’s Jeremiah Red, an Irish-style red ale, and BJ’s Piranha Pale Ale, a “hoppy” American-style beer. The chain’s signature handcrafted beers are made at several microbreweries and represent about 10% of BJ’s sales.
Last month, BJ’s reported that first-quarter profit rose 16% to $4.4 million. Revenue at restaurants open at least 18 months, known as comparable-restaurant sales, increased 4.4%, beating the most recent quarterly results at the Cheesecake Factory, California Pizza Kitchen and Brinker International Inc., the parent company of chains including Chili’s and Maggiano’s Little Italy.
Now, with consumers starting to splurge a bit on dining out and competitors still retrenching, BJ’s is being presented with a compelling growth opportunity. But the chain is being cautious in identifying new markets.
BJ’s plans to open at least 10 new locations this year, including restaurants in Reno, Tucson and San Antonio. It’s also hoping to expand in California, especially in Los Angeles, where Deitchle says the chain is “very bullish.”
Investors and analysts are similarly optimistic about the chain’s long-term prospects.
“They’ve got a very attractive and a very portable concept,” said Anton Brenner, senior research analyst at Roth Capital Partners, “one that you can stick just about anywhere in the country and it works.”
